Scaling an Online Shop: ads, email and repeat customers

01

The numbers that decide if you can grow

In simple words

Before you buy ads, you ask one question: when someone buys, how much is left after paying for everything? If a lot is left, you can afford to pay to find buyers. If almost nothing is left, more customers only means more work.

Before this course: Selling Online Courses and Digital Products (course 2.7), which follows Start an Online Store (course 2.6).

Key facts

Average order value (AOV) = total sales / number of orders.
Contribution margin = what a sale brings in minus the costs that come with that sale (product or print cost, shipping you pay, payment fees, packaging). It is the money left to pay for ads and your overhead.
Customer acquisition cost (CAC) = ad and marketing spend / new customers won.
Return on ad spend (ROAS) = sales value from ads / ad cost.
Break-even ROAS = 1 / contribution margin (as a decimal). If your margin is 40%, you need a ROAS of 2.5 just to cover the sale's costs and the ad.
From course 2.6: in Canada, Shopify Basic charges 2.8% + 30 cents per online card payment (check the pricing page for your country), so the payment fee is part of your cost.

Example (illustration only, not a quote or a promise)

Item	Amount
Order value (AOV)	$50.00
Product cost	$20.00
Shipping you pay	$6.00
Card fee: 2.8% x $50 + $0.30	$1.70
Contribution margin	$50.00 - $27.70 = $22.30 (44.6%)
Break-even ROAS	$50 / $22.30 = about 2.24
Highest CAC with no loss on the first order	$22.30

If it costs more than $22.30 in ads to win one new customer who buys once, you lose money on that first order.

Step by step

Pick one product or your average order.
Write its price, product cost, shipping you pay, payment fee and packaging.
Add the costs and subtract from the price to get contribution margin in dollars.
Divide that by the price to get margin as a percent.
Divide 1 by the margin (as a decimal) to get break-even ROAS.
Write the result at the top of your ad sheet.
Check: you can say "I lose money if my ROAS is under ___ ."

Watch on YouTube

How to calculate customer lifetime value the right wayThe Startup Club by Slidebean · YouTube · youtube.com

Videos by other creators on YouTube, for reference. They are not made by or affiliated with The Future Market.

LESSON 01The numbers that decide if you can grow

LESSON 01 / ANIMATED LESSON / AI VOICE00:00 / 01:00

Voice

Read the video script

[Host] "Do not buy ads until you know your break-even number."
[Screen: price minus costs equals contribution margin] "Take the price, subtract product, shipping and payment fees. What is left pays for ads."
[Text on screen: break-even ROAS = 1 / margin] "A 40 percent margin needs a ROAS of 2.5 just to break even."

Try it now

Do the table for your best seller. Then do it for a product with a lower margin and compare the break-even ROAS.

ClaudeStuck? Copy a ready-made prompt for Claude

Copy this, open Claude, paste it, and Claude will walk you through the lesson step by step.

For a grown-up: Claude is for adults (18+). Copy this, paste it into Claude, and use the answer to explain the lesson to your child.

I'm learning "Scaling an Online Shop: ads, email and repeat customers" on The Future Market. Lesson 1: "The numbers that decide if you can grow".

What the lesson teaches:
- Average order value (AOV) = total sales / number of orders.
- Contribution margin = what a sale brings in minus the costs that come with that sale (product or print cost, shipping you pay, payment fees, packaging). It is the money left to pay for ads and your overhead.
- Customer acquisition cost (CAC) = ad and marketing spend / new customers won.
- Return on ad spend (ROAS) = sales value from ads / ad cost.
- Break-even ROAS = 1 / contribution margin (as a decimal). If your margin is 40%, you need a ROAS of 2.5 just to cover the sale's costs and the ad.
- From course 2.6: in Canada, Shopify Basic charges 2.8% + 30 cents per online card payment (check the pricing page for your country), so the payment fee is part of your cost.

The exercise I'm working on:
Do the table for your best seller. Then do it for a product with a lower margin and compare the break-even ROAS.

I'm stuck. Please:
1. Explain the main idea in plain, simple words with one everyday example.
2. Walk me through the exercise one small step at a time. Ask me what I've done so far before giving the next step.
3. Don't just give me the final answer. Help me do it myself, and check my work when I share it.

I'm a parent helping my child (about 8 years old) with a lesson called "The numbers that decide if you can grow" from the course "Scaling an Online Shop: ads, email and repeat customers".

Here's what the lesson says:
Before you buy ads, you ask one question: when someone buys, how much is left after paying for everything? If a lot is left, you can afford to pay to find buyers. If almost nothing is left, more customers only means more work.

The activity:
Do the table for your best seller. Then do it for a product with a lower margin and compare the break-even ROAS.

Please explain this so an 8-year-old understands: short sentences, a fun everyday example, and no hard words.
Then give me 3 simple questions I can ask my child to check they understood, and a way to do the activity together, one tiny step at a time.

Open Claude

Sources

Shopify Canada pricing (fees used in course 2.6): www.shopify.com/ca/pricing
Google Ads Help, about conversion tracking and value: support.google.com/google-ads/answer/1722022

My notes

I learned this

02